The Basis for Excluding Liability for Economic Loss in Tort Law

The Basis for Excluding Liability for Economic Loss in Tort Law

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ThePhilosophicalFoundationsofTortLawDavidG.Owen

Printpublicationdate:1997PrintISBN-13:9780198265795PublishedtoOxfordScholarshipOnline:March2012DOI:10.1093/acprof:oso/9780198265795.001.0001

TheBasisforExcludingLiabilityforEconomicLossinTortLawPETERBENSON

DOI:10.1093/acprof:oso/9780198265795.003.0020

AbstractandKeywords

Thischapterfocusesontheso-calledexclusionaryruleandthebasisforexcludingliabilityforeconomiclossintortlaw.Itexaminesfivedifferentsituationsintowhicheconomiclosscasescanbedivided.Thefirstexclusionarysituationistypifiedbycircumstanceswherethedefendantdamagessomethinginwhichtheplaintiffmayhaveacontractualinterest(orsomethingelsethatislessthanapossessoryorproprietaryright)andthisimpairstheplaintiffsinterest,causinghimfinancialloss.Thetwoothernon-exclusionarysituationsarewheretheplaintiffsfinanciallossarisesthroughaspecialrelationshipofjustifieddetrimentalreliancebytheplaintiffonthedefendant,andwhereitresultsfromthedefendantsintentionalinterferencewiththeplaintiffscontractwithathirdparty.

Keywords:tortliability,economicloss,tortlaw,exclusionaryrule,damages,defendant,plaintiff,contract,thirdparty,intentionalinterference

I.Introduction


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Myaiminthisessayistosketchajustificationforthetraditionalexclusionoftortliabilityforcertaincategoriesofnegligentlycausedpureeconomicloss.Ihavechosentofocusontheso-calledexclusionaryrulebecause,evenafterextensivescholarlydiscussionanddespitethecontinuingauthorityoftherule,thereisstilllittleagreementastoitsunderlyingrationale.Thereisevenlessconfidencethatitsstrictapplicationisconsistentwithotheraspectsofthelawstreatmentofeconomiclossorwithfundamentalprinciplesoftortlaw.Bywayofintroduction,IwillfirstbrieflyidentifythemainsituationsthatraiseanissueoftortliabilityforeconomiclossandthengiveapreliminaryideaofthekindofjustificationthatIwillpropose,indicatinghowitdiffersinapproachfrommostcurrenteffortstoaccountforthisareaoftortlaw.

A.ClassifyingEconomicLossSituationsThisessayexaminesfivedifferentsituationsintowhicheconomiclosscasescanbedivided.Inthefirsttwosituations,whichmaybethoughtofasexclusionary,courtsholdthateconomiclossmaynotberecovered.Intheremainingthreesituations,bycontrast,courtshavepermittedrecovery.Thedefiningfeaturesofeachofthefivesituationsshouldbebrieflyidentified.

Thefirstexclusionarysituationistypifiedbycircumstanceswherethedefendantdamagessomethinginwhichtheplaintiffmayhaveacontractualinterest(orsomethingelsethatislessthanapossessoryorproprietaryright)andthisimpairstheplaintiffsinterest,causinghimfinancialloss.(IshallrefertothisasSituationI).1Forexample,Imayhavearightby(p.428) contractwithathirdparty,orjustaliberty,tousethethirdpartysbridgeformybusinesspurposes.Asaconsequenceofthedefendantdamagingthebridge,thecontractmaybefrustratedorImaynolongerbeabletoexercisemylibertyandImustseekalternativemeanstoaccomplishmyends,resultingineconomicloss.EversincethelandmarknineteenthcenturyEnglishcaseofCattle,English,American,andCommonwealthcourtswithveryfewexceptionshaveconsistentlyheldthatinsuchcircumstancesthedefendantcannotbeliableinnegligencefortheloss,whetherornotitwasforeseeable.Theplaintiffsclaimforrecoverywillbedismissedforfailuretostateacauseofaction.Financiallossthatarisesfromphysicaldamagetosomethingwhichtheplaintiffneitherownsnorpossessesisoftenreferredtointhedecisionsandinlegalscholarshipasrelationaleconomicloss.Therulethatprecludesliabilityherehasbecomeknownastheexclusionaryrule.

Theexclusionaryrulehasrecentlybeenappliedbyanumberofthehighestappellatecourtsinasecondtypeofsituation(hereinafterSituationII).2Heretheplaintiffmayhaveacquiredachattel,forexample,thatisinherentlydefectivebecauseofthedefendantmanufacturerswantofduecareand,onaccountofthedefect,theproductposesadangerofinjurytotheplaintiffspersonorproperty(otherthanthechattel)ifitisputtouse.Theplaintiffsuesthedefendantinnegligenceforthecostofputtingthechattelinaconditionsothathecancontinuetouseitfreefromthatrisk.Thecourtscharacterizetheclaimasoneforpureeconomiclossforwhichtherecanbenoliability.

Inmarkedcontrasttothesetwoexclusionarysituations,therearethreesituationsin


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whichcourtsregularlyholdthattherecanbeliability.Thedecisionsthatreachthisconclusionstandsidebysidethosethatapplytheexclusionaryruleandareofequalauthority.

(p.429) Inthefirstofthesenon-exclusionarysituations(hereinafterSituationIII),3thecourtsallowrecoveryforfinanciallossthatarisesincircumstancesidenticaltothosethatcomeundertheexclusionaryrule,saveforthefactthatthelossisdeemedtobeunavoidablyincurredbytheplaintiff.Inthistypeofsituation,theloss,thougheconomic,isanalogizedtophysicalinjurytotheplaintiffspersonorproperty.

Bywayofillustration,IwillgivetwoSituationIIIexamplesthatparallelthetwokindsofcircumstancesthatcomewithintheexclusionaryrule.First,inthecontextofusingsomethingthatiseitherownedorpossessedbyathirdparty,theplaintiffinvolveshisownpropertyorpersoninsuchawaythatitcanbeadverselyaffectediftheotherthing(whichhedoesnotown)isdamaged,withariskoffinanciallosstotheplaintiffasaconsequence.Supposethatthedefendantdamagesthethirdpartysthingand,beforetheplaintiffcanextricatehisownpropertyfromtheambitofdanger,itisaffectedbytheinitialdamage,causinghimfinancialloss;or,intheprocessofattemptingtoneutralizetherisktohisproperty,theplaintiffincurspurefinancialloss.Atfirstblush,thisseemstobeacaseofrelationaleconomiclossbecausetheplaintiffsinterestisimpairedasaresultofthedefendantdamagingsomethingthatbelongs,nottotheplaintiff,buttoathirdparty.Yetthecourtsdonotapplytheexclusionaryrulebutinsteadallowrecoverywheretheusualrequirementsfornegligencehavebeenmet.InthesecondSituationIIIexample,aplaintiffdoesnotknowthathischattel(whichthedefendantmanufactured)isdefectiveandthatitcancausehimfinanciallossthroughitsimpactonhisotherproperty;or,ondiscoveringthatthisisthecaseandinattemptingtoprotectthisotherpropertyfromthedanger,theplaintiffunavoidablysustainsfinanciallossasaresult.Here,too,theplaintiffcanrecover.

Thetwoothernon-exclusionarysituationsarewheretheplaintiffsfinanciallossarisesthroughaspecialrelationshipofjustifieddetrimentalreliancebytheplaintiffonthedefendant(hereinafterSituationIV),4andwhereitresultsfromthedefendantsintentionalinterferencewiththeplaintiffscontractwithathirdparty(hereinafterSituationV).5Toexplainthiscontrastwiththeexclusionaryrule,itwillbeessentialtobringouttherelevantdifferencesbetweenthesesituationsandthosecomingundertheexclusionaryrule.Forinthecaseofjustifieddetrimentalreliance,theloss,which(p.430) maybepurelyeconomic,canarisefromdamagedonetosomethingthattheplaintiffneitherownsnorpossesses.Andwheretheactionisforintentionalasopposedtonegligentinterferencewithcontract,amerecontractualrightqualifiesasafullyprotectedinterestoftencharacterizedasquasi-property6asagainstthedefendantwhois,ofcourse,aperfectstrangertothecontract.Itisworthnotingherethattheanalysisofcontractualrightsasquasi-propertyforthepurposesofintentionaltortisolderthantheconclusionthatsuchrightsdonotconstituteaprotectedinterestinanactionfornegligence.

B.JustificatoryApproaches


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B.JustificatoryApproachesTheanalysisofliabilityinthefivetypesofsituationsofeconomiclossjustdiscussedtwoexclusionaryandthreenon-exclusionaryprovidesus,atleastprovisionally,withfixedpointsforwhichasatisfactoryaccountmustbesought.Iproposetodothisbyelucidatingajustificationfortheexclusionaryrule.Thecentralaimoftheessayistosuggestarationalefortherulethatdrawsonfundamentalideasandprincipleswhichunderlieallfivesituationsofeconomicloss,bindingthemtogetherasacoherentunity.

TomakeclearerthesortofexplanationthatIwillpresent,itmaybehelpfultosetitagainstthebackgroundofcurrentattempts,bothjudicialandscholarly,tojustifytheexclusionaryrule.Thesemaybrieflybecharacterizedasfollows:withbutafewnotableexceptions,theysharetheassumptionthattherationalefortheruleisnottobesoughtinanygeneralconceptionofresponsibilityandfairnessthatiswidelyregardedasunderlyingthelawofnegligenceandoftortlawasawhole.Thisapproachshouldbefurtherexplained.

Whencourts,especiallyinrecenttimes,explicitlysuggestabasisfortherule,theycommonlyrefertoconsiderationsofpolicywhich,insteadofbeingrootedinageneralconceptionofliabilityfornegligence,areexplicitlyviewedasconstrainingwhatwouldotherwisebethenormaloperationofbasicprinciplesoftortlaw.Morespecifically,theyendorsewhatJamescalledthepragmaticobjectiontoliabilityforeconomicloss,whichjustifiestheruleonthesolebasisthatitprovidesameansofavoidingindeterminateorunlimitedliability.7Underlyingthisjustificationisaconceptionof(p.431) liabilityfornegligence,usuallyassociatedwiththenowoverruledcaseofAnns,8thatdefinesproximitysolelyintermsofthecreationofariskofforeseeableloss.Itisnotdifficulttoshowthatthisviewofliabilityleadstoaproblemofindeterminacy.

Giventheevidentsocialfactoftheinterdependenceofeconomicandproprietaryinterestsinvirtueofwhichapracticallyunlimitedrangeofinterestsareintertwinedinanalmostunlimitedvarietyofways,itmustbereasonablyforeseeablethatdamagetoanyoneinterestmayaffectotherinterests,howeverremovedorindirecttheimpactmaybe.Noreverberationfromtheinitialdamage,solongasitarisesthroughthisinterdependenceofinterests,canintelligiblybedistinguishedasextraordinaryorunforeseeable.Ifwecombinethisconclusionwiththeconceptionofliabilitythatequatesproximitywithforeseeabilityofloss,theremustbeatleastaprimafaciegeneraldutytorefrainfromcausingeconomicloss,whetheritisdirectorindirect,relationalorotherwise.Theexclusionaryruleisintroducedtocontain,andindeedtocutoff,thisconsequence.Itisneeded,inotherwords,preciselybecausetheconceptionofliabilityitselfleadstoaresultwhichisdeemedtobeundesirable.Farfrombeingmutuallysupportiveorintegratedpartsofalargerconception,theunderstandingofliabilityandtheexclusionaryrulearethusindirecttensionwitheachother.

Asfortheoreticalwriting,thefewsystematicattemptstoprovidearationalefortheexclusionaryruledrawexplicitlyoneconomicconcepts.9Themaindifficultywiththisapproach,inallitsdifferentversions,isthatitinvariablyneglectsorrejectscertaindistinctionsandrequirementsthatthecasesusuallytreatasessentialinreasoningtowardtheirconclusions;10orelseitintroducesnewconsiderationsandlaysstresson


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factorsofwhichthereisnotraceofinfluenceinthejudgements.11Thosewhoadoptthis(p.432) approachdonotjustifytheirdeparturefromjudicialreasoningonthebasisofanysupposedincompletenessinexistinglegalanalysisnordotheypointtoanylackoffitamongtheconsiderationsandprinciplesthatthelawinvokes.Theydisregardoraddtothereasoningfoundinthecasessimplybecausethisiscalledforbyeconomictheory.Butthisapproachfailstotakeseriouslyonitsowntermstheveryobjectthatissupposedlyunderinvestigation,namely,thelaw.Weareentitledtoexpectmorefromatheorythatpurportstobeatheoryoflaw.

TheapproachthatItakeinthisessaydiffersfundamentallyfromthesecurrenteffortsatjustification.Ishallattempttoroottheexclusionaryruleinarationalethatrestsessentiallyonaconceptionofliability,oratleastonanaspectthereof,whichispresupposedthroughoutthelawofnegligence.Iwilltrytodothisbyusingtheverycategories,principles,andconsiderationsonwhichcourtsrelyinreachingtheirconclusionsaboutliability.Becausethisaccountdrawsonandarticulatesideasthatarealreadyavailableinthepubliclegalculture,evenifonlylatently,itpresentsitselfasapublicjustificationoftheexclusionaryrule.12Inthisway,apublicjustificationpurportstobeinternaltothelaw.

Forthepurposesofthisessay,itwillsufficeifIamabletouncoverinthecasesadefiniteandcoherentconceptionofliabilitythatexplainstheexclusionaryruleandtoshowthattheconceptionisonewhichfitswiththeanalysisofliabilityinthefivesituationsofeconomiclossoutlinedaboveaswellaswithfundamentalprinciplesofnegligence.Mygoalistoidentifythatconceptionandtomakeclearitsessentialcharacteristics.Ishallnotanalyzeitsmoralbasisbyexplicatingitsunderlyingnotionofjusticeorbyjustifyingitfromamoralpointofview.13Nonetheless,Ibelievethatthefollowingdiscussionsetsoutthefirstcrucialstepintheelaborationofasatisfactorypublicjustificationfortheanalysisofliabilityinthecentralcasesofpureeconomicloss.Givenpresentdisagreementabout,andevensheerfailuretoexplain,therationaleandscopeoftheexclusionaryrule,ithopefullyaddressesaneedofourpubliclegalculture.Atstakeistheverypossibilityofacoherent,acceptable,andwidelysharedunderstandingofthereasonsunderpinningthelawofpureeconomiclossand,Iaimtoshow,ofabasicandpermanentfeatureofourconceptionofnegligence.

(p.433) II.TheReasonfortheExclusionaryRuleFormorethanacentury,virtuallyuninterruptedchainsofauthoritythatdevelopedevenindetailalongsimilarlinesintheBritishCommonwealthandintheUnitedStateshaveconsistentlyappliedtheexclusionaryruletoactionsinnegligenceforrelationaleconomicloss.Farfromabolishingorevenrestrictingtherule,courtstookittoitsnaturallimit,generalizingitsprincipleandfillingoutitsscopeandapplication.Andtheydidthisduringthesameperiodinwhichtheywereelaboratingamodernlawofnegligencethatpushedliabilityforphysicalinjuriestowardthefullextentofwhatwasforeseeableandshatteredancientbarrierstorecoverybasedonlimitationsassociatedwithprivityofcontractandsimilarrestrictiveconcepts.14Onwhatbasisdidthecourtsreachaconclusionseeminglyindirecttensionwiththebasictendencyofthelaw?


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Apointthathasbeenmaderepeatedlybybothcourtsandscholarsandsohasnowbecomefamiliaristhatthelawdidnotexcludeliabilityonthegroundthatsuchlossiseitherunforeseeableorfinancial.Thecaseshavemadeclearthat,ontheonehand,economiclossmaybeperfectlyforeseeableandyetnon-actionable,and,ontheother,thatpurelyeconomicinterestswillreceiveincertaincircumstancesthefullprotectionaccordedbytortlawtointerestsinpersonandproperty.

Lesswidelynoticed,however,isthestrikingfactthatmany,ifnotmost,ofthecasesthathaveupheldtheexclusionaryrulehavedonesowithoutmakinganyreferencetoapragmaticconcernoverextensiveliability.ThisisespeciallytrueoftheEnglish,Commonwealth,andolderAmericanauthorities.Inthisrespect,HolmesimportantopinioninRobins,15inwhichthisconsiderationofpolicydoesnotappeartoplayanyrolewhatever,isfullyrepresentativeofthemajorityofcases.Infact,thereareanumberofdecisions,amongthemLordPenzancesinfluentialspeechinSimpson16andthelaterdiscussionofWidgeryJinWeller,17thatsetoutwithgreatclarityanddetailthekindsoffar-reachingconsequencesthatmustfollowiftheplaintiffsclaimisvalid.Yet,thesejudgesgoonexpresslytosaythattheirrejectionoftheclaimdoesnot,andshouldnot,restonthispotentialforextensiveliability:[t]hemagnitudeoftheseconsequencesmustnotbeallowedtodeprivetheplaintiffsoftheirrights,butitemphasisestheimportanceofthecase.18Explicitjudicialendorsementofthepragmaticjustification,especiallybyEnglishcourts,iswithfewexceptionsarecent(p.434) phenomenon.19WhenLordOliverremarkedthatasIreadthosecases[whererecoveryforeconomiclosswasdenied]itwasnottheeconomicqualityofthedamagewhichpreventedrecoverybutthereasonwhythatdamagehadoccurred,20hecorrectlyandneatlystatedthegeneralview.

A.TheCommonFactorintheExclusionarySituationsIncircumstancesofrelationaleconomicloss(SituationI),thereasonwhythedamagehasoccurredis,first,thattheplaintiffhasacontractualinterestfallingshortofaproprietaryorapossessoryright,withrespecttosomethingownedorpossessedbyathirdparty;and,secondly,theplaintiffsustainsfinanciallosswhenhisinterestinthatthingisimpairedbythedefendantdamagingit.Forexample,theplaintiffmayhaveacontractualrightagainstathirdpartytousethelattersbridgeforbusinesspurposes,andtheplaintiffsuffersfinanciallosswhenheisnolongerabletousethebridgeafterthedefendantdamagesit.Thecourtsviewthissetofcircum-stancesandnothingmoreasasufficientbasisforprecludingliability.Thereasonthelawreachesthisconclusionwouldseem,then,primafacietolieinthesecircumstancesthemselves,whichthereforerequirecloseranalysis.

Theplaintiffsclaimiswithrespecttoaninterestthatarisesthroughacontractwithathirdparty.Theplaintiffmaybeentitledbythecontracttouse,say,thethirdpartyschatteltohisadvantageortobenefitfromitinsomeway;orhemaybeobligedbythecontracttomaintainthechattelinacertainconditionortoshouktervariousexpensesifitisdamaged.Asaresultofthedefendantdamagingit,theplaintiffsadvantagesmayberenderedlessbeneficialorhisobligationsmademoreonerous,givingrisetofinancialloss.Togeneralizeandtosimplifysomewhat,wemaysaythattheplaintiffsinterestinthe


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chattelissuchthatachangeinthechattelscondition(caused,forinstance,bythedefendantsfailuretouseduecare)willaffecttheusetowhichtheplaintiffiscontractuallyentitledorobligedto(p.435) putit,therebyreducingthebenefitsorincreasingtheburdensassociatedwiththatuse.

However,theplaintiffhasnoproprietaryorpossessoryrightinthechattel.Morespecifically,theplaintiffcannotshowthatatthemomentofthedefendantswrong,andindependentlyofit,hepossessesaproprietaryorapossessoryrightinthechattelfoundedonalegallyrecognizedgroundsuchasdemisecharter,bailment,oreasement.

Atcommonlaw,aproprietaryorpossessoryrightinsomethingentitlesapersontoexcludeanyoneelsefromusingitwithouthisconsent,solongasthefirstpersonhas,relativetoothers,abetterclaimtoitinownershiporpossession.21Ifaplaintifflacksaproprietaryorpossessoryrightinsomething,hehasnolegalstandingtoconstrainadefendantfromintentionallyusingitasthedefendantseesfit,evenifthisimpairsorinterfereswiththeplaintiffsinterests.Inotherwords,thedefendantcannotbeliabletotheplaintiffforsuchharmfulconsequences.Andifthisissowhentheconsequenceisintended,thesamemustbetruewhenitisbroughtaboutbythedefendantsnegligence.

Inadditiontopropertyandpossession,thereisoneotherpossiblebasisofexclusiverightinprivatelaw,namely,contract.However,contractualrights,incontrasttoproprietaryorpossessoryrights,arepersonalrightsthatareagainstadefiniteindividualordefiniteindividuals,sothatthefactthattheremaybeacontractualrightagainstonepersondoesnotinitselfimplythatthereisanexclusiverightagainstanyoneelse.22Nowincircumstancesofrelationaleconomicloss,theplaintiffssoleexclusiverighttotheuseofthedamagedchattelis,byhypothesis,acontractualrightagainstsomeoneotherthanthedefendant.Therefore,asagainstthedefendant,theplaintiffdoesnothaveanyrightatalltotheexclusiveuseofthechattel.Inotherwords,theplaintiffhasnolegalgroundsforcomplaintifthedefendantintentionallyornegligentlydamagesthechattel,therebydeprivingtheplaintiffofitsusewithresultingeconomiclosstohim.

Relativetothedefendant,thelegalsignificanceoftheplaintiffscontractualinterestcomestothis:heseeksprotectionofaninterestintheuseofsomethingfromwhichhehasnorighttoexcludethedefendant.ThistensionisidentifiedbyHolmes,whomakesitthegroundofhisdecisioninRobins:justicedoesnotpermitthatthepetitionerbechargedwiththefullvalueofthelossofuseunlessthereissomeonewhohasaclaimtoitasagainstthepetitioner;23Itseems,then,thatthedifficultywiththe(p.436) plaintiffsactionisnotthatthelossiseitherunforeseeableorfinancialorthatitcarrieswithitathreatofindeterminateliabilityandsomustfailasamatterofpolicy.Rather,theplaintifflacksarightonwhichtoresttheinterestthatformstheverybasisofhisclaim,andthisisdeemedtobefatalfromthestandpointofjustice.Since,onthisview,theproblematicaspectoftheclaimistheabsenceofarightorjus,therationalefortheexclusionaryrulemaybecharacterizedasjuridical.

Whatismore,thissameanalysisseemstoholdforthesecondsituationinwhichcourtshaveappliedtheexclusionaryrule.Here,thereadermayrecall,theplaintiffsfinancial


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lossconsistsinthecostofrepairingsomethingdefectivewhichheownssothathecancontinuetouseitwithoutdangerofinjurytohimselfortohisotherproperty.Thedefect,wesuppose,hasresultedfromthedefendantswantofduecare.Wefurtherassumethatthereisnocontractbetweentheparties.Forexample,intheimportantrecentEnglishcase,Murphyv.BrentwoodDistrictCouncil,24theplaintiffpurchasedfromaconstructioncompanyanewlybuilthousewhosedesignhadbeen(negligently,asitturnedout)approvedbythedefendantcouncil.Induecourse,theplaintiffnoticedthatthehousewasseriouslydefective,bothinitsstructureandinitsfoundation.Thesedefectsposedariskofimminentdangertothehealthandsafetyoftheoccupants.Unabletocarryoutthenecessaryrepairs,theplaintiffdecidedtosellthehouse,subjecttothedefects,foranamountconsiderablylessthanitsmarketvalueinsoundcondition.Theplaintiffsuedforthedifference.

Amongtheseveralleadingdecisionsthathaverecentlydeniedliabilityinthesecircumstances,noneissoperspicuousasLordOliversspeechinMurphy.AlthoughtheplaintiffsclaiminMurphywasforexpendituresmadeorneededtocorrectasituationinvolvingariskofphysicalinjury,LordOlivercharacterizedthelossaspurelyeconomicandascomingundertheexclusionaryrule,inthisregarddisagreeingfundamentallywithAnns.Heviewedthelossinthiswaybecause[t]heinjurywillnotnoweveroccurunlesstheplaintiffcausesittodosobycourtingadangerofwhichheisawareandhisexpenditureisincurrednotinpreventinganotherwiseinevitableinjurybutinordertoenablehimtocontinuetousethepropertyorthechattel.25Onthisview,whattheplaintiffsoughttoprotectwasaninterestinbeingabletousesomethinginacertain(safe)condition:theclaimwasforthecostofputtinghisdefectivepropertyinshapesothathecouldhavethebenefitofitsuse(ifonlyitsresalevalue)inanimprovedcondition.Butwhiletheplaintiffmayhaveownedthepropertyhewishedtoameliorate,whatheactuallyownedatthemomenthediscoveredthedefect,andthedangeritposed,wasjustdefectiveproperty.Thepropertyinanimprovedconditionwasnothispresentpropertyorpossession.Itsimply(p.437) didnotyetexist.Andonthefacts,theplaintiffdidnothaveagainstthedefendantacontractualoranyotherrighttothefuturepossessionandenjoymentofthepropertyinanon-defectivecondition.Here,justasinthefirstsituation,thefundamentaldifficultywiththeplaintiffsclaimseemstobethatitwaspremisedonhishavingaprotectedinterestintheuseofsomethingoverwhichhecouldnotestablishanyrightasagainstthedefendant.

Onthebasisofthisanalysisofthetwoexclusionarysituations,wearenowinapositiontoidentifyinapreliminarywaywhatcourtsseemtoregardastheessentialdifficultywiththeplaintiffsclaiminboth:theclaimiswithrespecttoaninterestintheuseofsomethingoverwhichtheplaintifflacksanexclusiverightasagainstthedefendant.Inthefirstsituation,althoughnotinthesecond,theplaintiffhasacontractualinterestinthechatteldamagedbythedefendant.Thisdifference,however,isimmaterial.Thesignificanceoftheplaintiffscontractualinterestinthefirstsituationissimplythatitestablishesthathisclaimis,withrespecttobenefitsorburdens,associatedwiththeuseofthechattel.26Butthiscanbeshowninotherways.Forinstance,theplaintiffmaysimplyrelyonthepossibilityofusingsomethingwithouthavingacontractualrighttodoso,orhemayhavethekindof


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interestinuseevidencedinthedefectivechattelcasesjustdiscussed.Similarly,thefactthatinthefirstsituation,butnotthesecond,thereisathirdpartywhoownsorpossessesthepropertywhichtheplaintiffwishestouseisalsoaninessentialdifference.Inbothsituations,theplaintiffhasnorightasagainstthedefendanttohavethepropertywhichhewishestouseavailableinaconditionthatissuitableforhisuse,whetherthisisbecausethepropertybelongstoathirdpartyorbecausewhatbelongstotheplaintiffisonlythepropertyinadefectivecondition.

B.DistinguishingUnavoidableEconomicLossThusfarIhavesuggestedabasisfortheexclusionaryrulebyspecifyingwhatiscommontothetwosituations(IandII)offinanciallossinwhichtheruleisapplied.Thisconclusionmustnowbetestedbyseeingwhetheritisconsistentwiththefactthatcourtspermitrecoveryforfinanciallossincertaindefectivepropertycasesandincertaincircumstancesofrelationaleconomicloss.

IntheMurphycasediscussedabove,LordOliverdistinguishescertaincircumstancesinwhichhewouldnotapplytheexclusionaryrule:theplaintiffcanrecoverwherehesustainsfinanciallossinpreventinganotherwiseinevitableinjury.ItakeLordOlivertobereferringheretowhatIidentified(p.438) earlierasSituationIII,inwhichtheplaintiffattemptstoinsulatehisotherpropertyfromtheriskimposedbyhisdefectivechattel,andheunavoidablyincursfinanciallossintheprocessofdoingso.AsinSituationII,theplaintiffhereownssomethingthat,becauseofthedefendantsnegligence,posesadangertotheplaintiffspersonorotherproperty.Thedistinguishingfeatureofthisthirdsituationisthatasaresultofordespitetheplaintiffseffortstoavoidthedanger,heunavoidablysuffersfinancialloss.Economiclossthatarisesinthiswayisanalyzedaspartofphysicalinjurytopersonorpropertyandisrecoverableifreasonablyforeseeable.

Moreover,courtsalsoviewcertaincasesofrelationaleconomiclossinthissamelight.Atypicalsituationiswheretheplaintiffisusingsomethingthatbelongstoathirdpartyinsuchawaythatifitisdamaged,theplaintiffsownpropertymaybeendangered.27Thedefendantdamagesthethirdpartyspropertyandtheplaintiffunavoidablysuffersfinanciallossbeforehecanextricatehispropertyfromthedangerorasaresultofhisattempttodoso.AlthoughthelossiseconomicandrelationalbecauseitisfinanciallossthatisconsequentialondamagedonetosomethingthattheplaintiffneitherownsnorpossessesandsoseemsinthisrespectatleasttobeindistinguishablefromSituationI,theexclusionaryruleisnotapplied.28

Howdoweaccountforthefactthatthelawgrantsrecoveryinthesecasesofunavoidablefinancialloss?Whatwemustdetermineiswhetherthesecasesshareacommonfeaturewhichdistinguishesthemintelligiblyfromthecircumstancesthatfallundertheexclusionaryrule.Inthefollowingdiscussion,Ibeginwithandfocusonunavoidablerelationaleconomicloss.Idothisbecauserelationaleconomiclossistheoldestandbestestablishedcategoryoflosstocomeundertheexclusionaryrule;therefore,itisespeciallyimportanttoexplainwhycertainformsofrelationallossareregularlyexemptedfromitsapplication.


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Likecasesofrelationaleconomiclossthatcomeundertheexclusionaryrule,unavoidablerelationallossalsooccursbecause,inthecontextoftheplaintiffusingsomethingwhichheneitherownsnorpossesses,hesuffersfinanciallosswhenthatthingisdamagedbythedefendant.Forexample,supposethattheplaintiff,acaterer,ownsandusesanumberofrefrigeratorsthataresuppliedwithelectricitybyathird-partypowercompanyundercontract,andthatthissupplyisunexpectedlyinterruptedduringthenightasaresultofthedefendantnegligentlydamagingthepowercompanyselectricalcable.Unlesstheplaintiffcantakehisfoodoutofhisnon-functioningrefrigerators,withinabriefperiodoftime,itwillspoil.Todo(p.439) this,however,hemustpayaworkeranextrafeetoperformthisemergencynight-timework.Thefoodissuccessfullyremovedandtheplaintiffseekstorecoverdamagesfromthedefendantfortheextranight-timelaborfeepaidtotheworker.Nowitmightbethoughtthatinmakingaclaimforthislosstheplaintiffmustinvokearighttoexcludethedefendantfrominterferingwiththeplaintiffsuseofsomethingwhichheneitherownsnorpossesses(thesupplyofelectricitythroughthecable),makingthissituationindistinguishablefromrelationallosscasesthatcomeundertheexclusionaryrule.This,however,wouldbemistaken.Thelossoccurshereinaqual-itativelydifferentway.Thisneedstobeexplained.

Theplaintiffsclaimhereinvolvestheassertionagainstthedefendantofaright,nottohavethecontinuedortheunimpaireduseofsomethingwhichtheplaintiffdoesnotownorpossess,butrathertobefreefrominjurycausedtohispersonorproperty.Thefinanciallossthatissufferedbytheplaintiffresultsjustfromhisefforttoprotecthispropertyfromtheveryriskimposedonhimbythedefendant,viz.,thatthefoodwillspoilifleftinthenon-functioningrefrigerators.Thefinanciallosshereoccursthroughtheplaintiffsproperty(refrigerators)beingsoconnectedwiththethirdpartysproperty(cable)thattheformercanbeaffected,aspartofasinglecausalsequence,byconductthatimpingesonthelatter.Itiscertainlytrue,inourexample,thatthisconnectionexistsbecausetheplaintiffhaschosentomakeuseofthethirdpartyssupplyofelectricity.However,heneednotresthisclaimtorecoverforfinanciallossonapurportedrighttopreventthedefendantfrommakingtheelectricalcableunfitforhisuse.Theclaimonlyrequiresthatthedefendantnotaffectthecableinsuchawaythattheplaintiffsustainsalossbeforehecan(orasaresultofhisattemptingto)extricatehispropertyfromtheambitofrisk.Theclaimneedreferonlytotheseveringandnottothemaintenanceoftheconnectionbetweentheplaintiffspropertyandthethingthatheisusingbutdoesnotown.Thefactthattheinjurytakesplaceincircumstancesoftheplaintiffusinganothersthinggoesonlytotheparticularmannerorcausalsequencethroughwhichtheinjuryisbroughtabout.Itdoesnotimplyaright,asagainstthedefendant,topresentorfutureuseofthething.

Theplaintiffsactionforfinanciallosshererestsonthesameimplicitclaimofrightagainstthedefendantaswouldanactionagainstthedefendantforthevalueofthefood,supposinginsteadthatithadspoiledbeforetheplaintiffhadareasonableopportunitytotakeitout.Thereisnodoubtthat,assumingthatrequirementsofcausation,foreseeability,andsoforth,weremet,therecouldberecoveryforthislosseventhoughitwasconsequentialontheplaintiffusingsomething(thepowercompanyselectrical


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cable)whichheneitherownednorpossessed.Itwouldbeviewedasacaseofsimpleinjurytoproperty.Thepointisthatinbothsituationstheoneinvolvingapurefinancialloss,theotherpropertydamagetheplaintiff(p.440) doesnothavetoassertimplicitlyagainstthedefendantarighttothecontinueduseandbenefitofthethirdpartyscableinordertomakeouthisclaimforrecovery.Theplaintiffsfinanciallossarisingfromthepaymentoftheextrafeecanbeanalyzedintheverysametermsasacaseofinjurytoproperty.

Tobringoutthelimitsofthisclaimforfinancialloss,considerthefollowingclaimsbywayofcontrast.Suppose,forinstance,thatbecausetheediblecannotberepairedforseveraldays,theplaintiffisobligedtorentotherrefrigeratorstopreservehisfood,forwhichexpenseheseekscompensation.Orsecondly,supposethattheplaintiffsactionagainstthedefendantistorecoverthatpartofthefeepaidtotheworkerwhichwouldhavebeenchargedanywayinordinarycircumstancesforremovalofthefood.Orfinally,supposethattheplaintiffclaimstheprofithewouldhaveearnedhadhebeenabletocontinuetousehisownrefrigeratorsandtodisposeofthefoodinhisusualway.Ineach,theplaintiffsclaimisvalidonlyifwepresupposethathehas,asagainstthedefendant,arighttocontinuetoreceiveandtobenefitfromthethirdpartyselectricityandthereforearightasagainstthedefendanttothecontinueduseofafunctioningrefrigerator.Thelossesherehappeninthesamewaythatrelationaleconomiclossoccursinthosecasesthatcomeundertheexclusionaryrule.Theselossesrepresentbutdifferentconsequencesofthematerializationofthesameriskthattheplaintiffmaylosetheuseofthethirdpartyscableasaresultofthedefendantsnegligencesomethingquitedifferentfromtheriskthattheplaintiffsfoodwillspoilifunavoidablyleftinthenon-functioningrefrigerators.Thelatterrisksimplynolongerexists;theplaintiffhashadareasonableopportunitytoremovethefoodunspoiled.Inthisrespect,theseclaimsforfinanciallossarenotdifferentfromaclaimofpropertylossarisingincircumstanceswheretheplaintiffhasdeliberatelycourtedtheriskofspoilagebyputtingfoodinhisrefrigeratorsafterheknowsthemtobenon-functioning.Inboth,theplaintiffsclaimwouldhavetorestonthesameimplicitassertionofright:thatasagainstthedefendant,theplaintiffhasarighttothecontinueduseofthethirdpartyselectricity.

Moreover,thisanalysisofUnavoidablerelationaleconomiclossalsoholdsforthedefectiveproductcasesdistinguishedbyLordOliverasnotcomingundertheexclusionaryrule.Inthosecases,theplaintiffsustainsafinanciallossbecauseofhisefforttoavoidtheveryriskofinjurytohimselfortohisotherpropertyposedbyadefectivechattel(whichheowns).Thefinanciallossthatheclaimsisnotthecostofcorrectingthechattelsdefectsothathecancontinuetouseitwithoutdangertohimselfortohisotherproperty,butjusttheexpense,ifany,thatheunavoidablyincursinattemptingtoputhimselforhisotherpropertyoutsidetheambitofperceiveddanger.Iftheplaintiffcandothis(aswillusuallybethecase)by(p.441) simplyceasingtousethedefectivechatteloncehehasbecomeawareofthedangerposed,therewillbenorecovery.Theonlyexceptionwouldbewhere,intheparticularcircumstances,theplaintiffhastoincurcoststoenablehimjusttoceaseusingthechattelortoundertakefurthermeasurestoprotecthimselforothersifthedangerposedbythechattelcontinuesdespitehisceasingtouse


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it.Thisanalysisensuresthattherightclaimedbytheplaintiffagainstthedefendantisnotarighttotheuseofsomethingthatisnothis(viz.,thechattelinanon-defectivecondition),butonlyarighttotheintegrityofhispersonorproperty(otherthanthechattel).29Andthefactthatthechattelisownedbytheplaintiffandnot,asincasesofrelationalloss,byathirdpersondoesnotaffectthebasicnatureoftheplaintiffsclaimhere.ItisnodifferentfromaclaimforUnavoidablerelationalloss.

Thisbriefdiscussionofthecasesofunavoidablefinanciallossmakesclearthatthelegalanalysiswhichtreatsthemdifferentlyfromactionsbarredbytheexclusionaryruleturnsonadifferencebetweenthemthatisbothintelligibleandcategorical.Withoutattemptingtoprovideadeeperjustificationforthislegalanalysis,wecanstillsaythatthecircumstanceswhichthelawviewsasdifferentdoindeedinvolvedifferenttypesofpossiblelegalclaims.Andwecanstatethelatterinintuitivelyintelligibleandstraightforwardterms.Moreover,ourdiscussionalsoexplainswhytherealdifficultywithactionsbarredbytheexclusionaryruledoesnotlieinthefactthattheyareforlossthatiseithereconomicorunforeseeable.Thedeterminingfactorseemstobethekindofclaimthattheplaintiffmustimplicitlyasserttoestablishhisloss.Itshouldbeemphasizedthatanactiontorecoverforphysicallosstopropertymayrestonthesamekindofclaimthatisbarredbytheexclusionaryrule.Suppose,forexample,thatthesafetyoftheplaintiffspropertydependsonhisbeingabletousesomethingwhichheneitherownsnorpossesses,andthathispropertyisdamagedwhenthethingisnolongeravailableforhisusebecauseofthedefendantswantofduecare.Justasthereisnoliabilityforrelationaleconomiclossthatrestsonaninterestofthiskind,sotoothereshouldnotbeandisnot30liabilityforphysicallossinvolvingthesamesortofinterest.

Consideringthedifferencebetweencasesthatallowrecoveryforunavoidablefinanciallossandthosethatcomewithintheexclusionary(p.442) rule,theprinciplebarringrecoveryforeconomiclossmaybestatedasfollows:anactionfordamagesmustfailifitisnotgroundedinarightwhichisexclusiveasagainstthedefendant.Moreemphatically,theplaintiffsclaimmustnotrest,eveninpart,onaninterestthatisnotrootedinarightofthiskind.Toexplain,incasesofrelationaleconomiclossbarredbytheexclusionaryrule,theplaintiffsactionmaybeforthediminutioninvalueofanassetthatheowns,thelosshavingresultedfromthedefendantinjuringsomethingelsethatbelongstoathirdperson.Yet,ontheforegoinganalysis,theplaintiffshouldnotrecover,althoughthedefendanthasaffectedthevalueoftheplaintiffsownproperty,ifthemaintenanceofitsvaluedependsontheplaintiffshavingthecontinuinguseofthethingownedbythethirdperson.Whiletheplaintiffsclaimdependsmerelyinpartonhisassertingaprotectedinterest(intheuseofthethirdpartysthing)thatdoesnotrestonanexclusiverightasagainstthedefendant,thisisenoughtodisqualifytheaction.Fortheplaintifftohaveaprotectedinterestvis--visthedefendant,itmustbepossibletoanalyzethatinterestwhollyintermsofanexclusiverightagainsthim.

Anotherwayofarticulatingthereasonfordismissingtheplaintiffsactionistosaythatthelossoccursbecausetheplaintiffhasfreelydecidedtorelyontheavailabilityofsomethingfromwhichhecannotrightfullyexcludethedefendant,andthismustbeathisownrisk.


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Ineffect,theplaintiffhaschosentomakethewell-beingofhispersonorproperty(financialaswellasphysical)dependentontheexistenceofcertaincontingentcircumstances(forexample,theavailabilityofsomethingforuse)whichthedefendantmayalteratwillwithoutviolatinganyrightintheplaintiffasagainsthim.Iflossresults,itwillbeimputedtotheplaintiffsownvoluntarychoicetorely,nottothedefendantconduct.Onthisanalysis,thenon-recoverabilityofeconomiclossillustratestheideathatpersonsarenotgenerallyresponsiblefortheconsequencesofothersindependentdecisionstorelyinthisway,atleastwherethoseconsequencesrepresentthematerializationofrisksthatwereentailedbysuchreliance.Thus,evenifitisperfectlyforeseeablethattherehasbeenandwillbesuchreliance,thisalonecannotmakeothersaccountable.Somethingmoreisrequired.WhatthisisIwillexplorelater,below.

Inthelightofthislastpoint,however,thefollowingobjectionmightberaisedagainstourpreviousanalysisofcasesofUnavoidablefinanciallosswhererecoveryisgranted.Whenaplaintiffdecidestousesomething(ownedbyathirdparty)insuchawaythatdamagetoitcanresultintheplaintiffsufferingunavoidablefinancialloss,itmaybecontendedthattheplaintiffhasalsoactedathisownriskandthatconsequentlythereshouldbenoliability.Toreferthisobjectiontotheearlierexample,onemightcontendthatbecausetheplaintifffreelychosetohookuphisrefrigeratortothethirdpartyspowersupply,hecannotreasonablyholdthedefendant(p.443) responsibleforcausingalossthathappenedonlybecausetheplaintiffdecidedtomakeuseofthethirdpartyselectricity.

Theshortanswertothisobjectionisthatthedefendantmustregulatehisconductonthebasis,first,thattheplaintiffwillmakeuseofthingswhichhemaynotown,therebybringinghimselforhispropertyintorelationwiththem;andsecondly,thatbydamagingthosethings,thedefendantcanundercertaincircumstancesforeseeablyinjuretheplaintifforhisproperty.Thismustbetakenasgivenwhendecidingwhichconsequencesaretobeimputedtothedefendantsconduct.Thereasonforthiscanbeexplainedasfollows.

Thefactthateveryindividualissomewhereandismakinguseofsomeexternalobjects,withtheresultthatheorhispropertyisputintorelationwiththemandissubjecttobeingaffectedbyconductthataffectsthem,isaninevitableincidentofbeingactiveintheworld.Thethoughthereisnotthatpersonsmayrequirecertainthingstomeettheirneedsortofulfiltheirpurposes.Arequirementofthissortwouldmaketheplaintiffsclaimintooneforthecontinueduseofsomething,whichcouldrunafoultheexclu-sionaryrule.Theideaisratherthis:asbeingswhoexistinspaceandtimeandwhoareinescapablyactiveandpurposive,31personsarenecessarilyandalwaysconnectedinmanifoldwayswithotherthingswhichtheycanaffectandwhichinturncanaffectthemaspartofacausalsequence.Morespecifically,asinescapablypurposivebeings,personsmustalwaysbesubjectingexternalthingstotheirpurposesinotherwords,theymustbemakinguseofthelatterinsomeway.Thisisalsoaninseparablefeatureoftheirbeingintheworld.

If,then,indecidingwhichconsequencesaretobeimputedtoadefendantsconduct,we


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taketheplaintifftobeactingathisownriskwithrespecttoharmsthatresultfromdamagetosomethingelsewithwhichheisconnectedbysuchinevitableuse,weineffectsaytotheplaintiffthatotherscannotbeheldresponsibleforinjuringhimifthelossarisesthroughanecessaryandinseparableaspectofhisbeingapurposiveagentintheworld.Butthiswouldbetodenytheplaintiffsstandingasarights-holderwithrespecttotheverycapacity,namely,acapacityforpurposiveconduct,thatisusuallythoughttomarkhimoffasanaccountablebeingwhocanhaverightsandobligations.Thus,inassertingapurportedlibertytoinjureothersinthisway,thedefendantputsforwardaclaimthatisdirectlyincompatiblewiththeverybasisofright.Itisnolessproblematicthaniftheplaintiffweretoimputetothedefendantthewhollyunintendedand(p.444)unforeseeableconsequencesofhisactionsthatis,consequenceswhichthedefendantcouldnotpossiblyhavechosentoavoid.32

Thisanalysisappliestoourexample.There,thereaderwillrecall,theplaintiffsustainedfinanciallossasaresultofhisefforttoprotecthisproperty(hisfood)fromtheveryriskofharmcreatedbythedefendant(spoilage).Inclaimingcompensationfortheextrafeechargedfortheremovalofthefood,theplaintiff,wesaw,didnothavetoassertaninterestinthecontinuinguseofthethirdpartyselectricity.Tothecontrary,byremovinghisfood,hecanceledhisdependencyonit.Accordingly,thefactthathehappenedtobeusingtheelectricityatthetimeofthedefendantsnegligencerepresentsnothingmore(butalsonothingless)thantheuseofsomethingatagivenpointintime;thatis,itrepresentsaninevitableincidentofpurposiveconductandmustbetakenassomethinggivenbythedefendantindecidingwhatprecautionstoadoptinordertoavoidcausingtheplaintiffaloss.Wherethecircumstancesareotherwise,andtheplaintiffsclaiminvolvestheimplicitassertionofarighttothecontinueduseofsomethinginthefaceofthedefendantsrisk-imposingactivity,theuseisnolongerinevitableintherequiredsenseandsothisconclusiondoesnotfollow.

Thus,wemayprovisionallyconcludethatcasescomingwithintheexclusionaryrule,aswellasthoseallowingrecoveryforunavoidablefinancialloss,allseemtobeexplicableonthebasisofasimplefactornamely,whether,atthetimeofthedefendantswrong,theplaintiffsinterestiswhollygroundedinanexclusiverightasagainstthedefendant.Whatwemustnowdetermineiswhetherthisrequirementofanexclusiverightreflectsabasicunderlyingpremiseofourgeneralconceptionofliabilityfornegligenceand,ifso,preciselywhatitis.Forajustificationthataimstobeinternaltothelaw,adefiniteaffirmativeanswertothisquestionisessentialiftheproposedexplanationistogetofftheground.

III.TheExclusionaryRuleandNonfeasanceAnaccountthatseekstoremaininternaltothelawfaceshereaparticulardifficulty.Asarule,thecourtshavenotexplicitlyattemptedtorootthereasonforthenon-recoverabilityofeconomiclossinanunderlyingconceptionofnegligence.Whatwefindinsteadarestatementsthatsuchclaimsarenotoftherequisitekind,ordonotstatealosswhichthelawregardsasrecoverableorthatthereisnolegalauthoritytosupportsuchanaction(p.445) exceptonthepartofsomeonewithaproprietaryorpossessory


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rightoftherequiredsort.33Indeed,intheveryfirstdecisionthatannouncedtheexclusionaryrule,thecaseofCattle,LordBlackburnjustifiedtheconclusionofnoliabilityonthegroundthat[n]oauthorityinfavouroftheplaintiffsrighttosuewascited,andasfarasourknowledgegoes,therewasnonethatcouldhavebeencited.34Suchrelianceonauthorityseemsonitsfacetobeproblematic.Ithink,nevertheless,thatweshouldresistthealltooeasytemptationtodismisstheseformulationsasnomorethanfailedattemptstojustifytheexclusionaryrule.Thereisanother,moreplausible,viewofthematter.

ItisimportanttorecallherethatsuchformulationsarefoundinlongandvirtuallyuninterruptedchainsofauthorityinboththeBritishCommonwealthandtheUnitedStatesthatconsistentlyupheldtheexclusionaryrulethroughouttheperiodofthedevelopmentofmodernnegligencedoctrine.Whatobstaclepreventedallthesecourtsoveraperiodofmorethanacenturyfromlimitingorevenabolishingoutrighttheexclusionaryrule,insteadofexpandingandgeneralizingitsapplicationastheydid?None,itissubmitted,exceptperhapsthis:courtsrejectedplaintiffsclaimsofthistypebecausetheyviewedtheseclaimsasfailingtomeet,andindeedasdirectlycollidingwith,aprerequisiteofliabilitywhichtheyalreadyregardedasbasicevenbeforethedevelopmentofageneralanddistinctconceptionofnegligenceinthiscentury.Thatcourtscontinuedtoadoptformulationsofthiskindtojustifytheexclusionaryruleevenwhiletheywereinitiatingfar-reachingtransformationsinnegligencelawisatleastconsistentwiththishypothesis.Thedifficulty,ofcourse,isthatforthemostpartthecourtsdidnotidentifythisprerequisitenorexplainitsrelationtothegeneralconceptionofliabilityfornegligencewhichtheywereelaborating.Sothehypothesiscannotbedefinitivelydemonstratedonewayoranother.Ontheotherhand,judicialrecoursetoauthorityispreciselythekindofjustificationthatinvitesfurtherexplication.Ifwecanidentifyafundamentalpremiseofliabilitywhichwas,andcontinuestobe,presupposedthroughoutthelawoftortsbutwhichisrarelyarticulatedinexplicitandabstractterms,andif,moreover,thereisaclosefitbetweenthispremiseandtheanalysisofliabilityintheeconomiclosscases,therewillbestronggroundsforsupposingthehypothesistobecorrect.Byexplainingjudicialrelianceonprecedentascongruentwithawidelyacceptedfeatureofourconceptionofliability,theanalysiscanremaininternaltothelawevenwhileitgoesbeyondthelawsexplicitformulationsintermsofauthority.Givenlimitsofspace,abriefdiscussionwillhavetosuffice.

(p.446) Itwasonlyinthiscenturythatthecommonlawelaboratedadistinctandgeneralconceptionofnegligenceonethatstilllargelyprevailstothisday.Accordingtothisconception,liabilityistobeanalyzedintermsofarelationofdutyandcorrelativerightbetweendefendantandplaintiff.35Incasesofnon-recoverableeconomicloss,wesawthattheplaintiffsinterestisnotgroundedinanexclusiverightagainstthedefendant.Giventheideaofthecorrelativityofrightandduty,wecanreformulatetheproblemwiththesecasesinthemorefamiliartermsofduty,asfollows:whatfeature,ifany,ofourgeneralconceptionofnegligenceprecludesadutyofcareinthesecircumstances?36

Certainly,itiswellestablishedthatingeneralanindividualcannotbeunderadutyof


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caretowardanotherunlesshisactsoromissionsimposeariskofforeseeablelossontheother.Buttherequirementofforeseeabilitydoesnotexplainthenon-recoveryofeconomicloss.Forwhileforeseeabilitymaybenecessarytotheexistenceofadutyofcare,itisclearthatitisnotasufficientconditionthatthereisafurtherquitedistinctrequirementwhich,wewillsee,isconceptuallypriortoit.Aparticularlyexplicitandclearrecognitionofthisfurtherrequirementisfoundintheoften-citedspeechesoftheLawLordsinthecaseofHomeOfficev.DorsetYacht.37Take,forinstance,thisstatementofLordDiplock:

ThebranchofEnglishlawwhichdealswithcivilwrongsaboundswithinstancesofacts,and,moreparticularly,ofomissionswhichgiverisetonolegalliabilityinthedoeroromitterforlossordamagesustainedbyothersasaconsequenceoftheactoromission,howeverreasonablyorprobablythatlossordamagemighthavebeenanticipated.Examplescouldbemultiplied.Youmaycauselosstoatradesmanbywithdrawingyourcustomthoughthegoodswhichhesuppliesareentirelysatisfactory;youmaydamageyourneighbourslandbyinterceptingtheflowofpercolatingwatertoiteventhoughtheinterceptionisofnoadvantagetoyourself;youneednotwarnhimofariskofphysicaldangertowhichheisabouttoexposehimselfunlessthereissomespecialrelationshipbetweenthetwoofyousuchasthatof(p.447) occupieroflandandvisitor;youmaywatchyourneighboursgoodsbeingruinedbyathunderstormthoughtheslightesteffortonyourpartcouldprotectthemfromtherainandyoumaydosowithimpunityunlessthereissomespecialrelationshipbetweenyousuchasthatofbailorandbailee.38

Alltheseexamplesofnoliabilityshareacommonfeature:theplaintiffsclaimagainstthedefendantforlosssufferedasaresultofthelattersactoromissiondependsontheplaintiffassertinganinterestwhichisnotrecognizedbylaw.Moreprecisely,theplaintiffmustclaimarighttoexcludethedefendantfromusingsomethingwhichtheplaintiffneitherownsnorpossesses(viz.,theexamplesofwithdrawingonescustomandinterceptingtheflowofpercolatingwater);orhemustassertarighttocompelthedefendant.toprotecthispersonorpropertyfromrisksthatarewhollyindependentofthedefendantsconduct(viz.,thefailuretorescueexamples).Itisclearthattheunderlyingdifficultywitheachoftheseclaimsisthattheplaintiffcannotgroundtheminanotionofexclusiveownershiporright;thatis,inarighttoprohibitothersfromusingorinjuringwhatisonesownwithoutonesconsent.Inthefirstsetofexamples,theplaintiffdoesnotownorpossessthethingfromwhichhewishestoexcludethedefendant;inthesecond,theplaintiffseeks,nottopreventthedefendantfromusingorinjuringtheplaintiffsthing,buttoenlistthedefendantseffortstopreserveitagainstriskswhichhavearisenindependentlyofhisconduct.Bywayofexplainingtheselong-establishedandwidely-acceptedpropositionsoflaw,wereachthefollowingconclusion:absentaspecialrelationshipbetweentheparties,adutyofcarewillnotbeimpliedunlesstheplaintiffsclaimagainstthedefendantisrootedinapurelynegativerightofexclusiveownership.ThisconclusionrepresentsnothingotherthantheclassicdistinctionbetweenmisfeasanceandnonfeasanceofwhichBohlenwrotethat"[t]hereisnodistinctionmoredeeplyrooted


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inthecommonlawandmorefundamental.39

Topreventmisunderstanding,itshouldbeemphasizedthatthedistinctionbetweenmisfeasanceandnonfeasanceisnot,andhasnevergenerallybeenviewedbythecourtsas,adifferencebetweenactsandomissions.Anomissionundercertaincircumstancesmayconstitutemisfeasance,justasanactinanothercontextmaybemerenonfeasance.Nordoesthedistinctionprovideanintelligiblebasisfortreatingdifferentlyphysicalandfinancialloss.Itgoesrathertotheformofrightinwhichtheplaintiffsclaimagainstthedefendantmustbeconceivedtobeactionable.Itmustbepossibletorootitinaclaimofexclusiveright,irrespectiveofwhetherthe(p.448) contentoftheentitlementisphysicalorfinancialinquality.Theplaintiffslossmustbeasubtractionfrom(orinjuryto)somethinginwhichtheplaintiffhasanexclusiverightsomethingwhichcountsastheplaintiffsownagainstthedefendant;but,atthesametime,theplaintiffmustnotclaimmorethanthispurelynegativeentitlementtoexcludethedefendant.Accordingly,thelawsometimesformulatesthisdistinctionasadifferencebetweencausinginjury(whichcangiverisetoliability)andwithholdingabenefit(whichcannot).

Theideaofmisfeasancestipulatesanessentialconditionthatmustbemetiftheplaintiffslossistobeactionableasaviolationofarightthatcanbecorrelativetoanothersdutytotakecare.Itisthefirststepinconceptualizinganinterestthatcanbetheobjectofadutyofcare.Andsinceitestablishestheexistenceofsomethingthatcanqualifyasalossforthepurposesofliability,itisconceptuallypriortothefurtherquestionofwhethertherehasbeenforeseeableloss.Thelawwillnotimplyadutyofcareunlessbothconditionsaresatisfied.

Thedistinctionbetweenmisfeasanceandnonfeasance,asIhavejustexplainedit,underliesthelawoftortsasawholeand,inparticular,ispresupposedinthelawofnuisance,40negligence,41andintentionalwrong.42Tosatisfytheprinciplethatthereisliabilityonlyformisfeasance,aplaintiffmustestablishthathehadtherequiredentitlement(againstwhichhislosswillbemeasured)attheverymomentatwhichthedefendantsdutyisallegedtohavearisen.Forexample,inanuisancecasesuchasFontainebleau,wheretheplaintiffslossstemsfromthedefendantsinterferencewiththefreeflowoflightfromadjoininglandtotheplaintiffspremises,thelawwillrequiretheplaintifftoestablishaproprietaryorpossessoryrighttothatflowonsomerecognizedlegalbasis.Failuretoestablishtherightwillresultinthecourtsrefusaltoimposeadutyonthedefendanttorefrainfromunreasonablyobstructingthepassageoflight,eventhoughthisdetrimentallyaffectstheplaintiffbydiminishingtheuseandvalueofhisownproperty.Similarly,incircumstancesofrelationaleconomiclosswherethelossflowsfromthedefendantimpairingtheplaintiffsuseofsomething,theplaintiffmustestablishonsomerecognizedlegalgroundsuchaseasement,demisecharter,bailment,andsoforththathe(p.449) hadaproprietaryorpossessoryrightinthatthing.43Thisisanecessaryprerequisitetoestablishingtheexistenceofarelationshipofproximitybetweenthepartiesthroughwhichadutyofcarearises.Thedutyisnotthesourceoftheproprietaryorpossessoryright.Onthecontrary,theexistenceofadutypresupposestheantecedentexistenceofthisentitlement.Thattheplaintiffsclaiminthenuisancecase


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displaysthesamebasicfeaturesandinvolvesthesamedifficultyasdoclaimsforeconomiclossthatarebarredbytheexclusionaryrulebecomesclearonceweviewtheclaiminthelightofthedistinctionbetweenmisfeasanceandnonfeasance.Thesedecisionsarebutdifferentinstancesoftheoneprinciplethattherecanbenoliabilityfornonfeasance.

Bycontrast,incasesofunavoidablefinancialloss,claimsdonotgobeyondmisfeasance.Theplaintiff,wesaw,needonlyassertarightagainstthedefendantthathenotimpairorinjurewhatbelongstotheplaintiff,notarighttothecontinueduseofsomethingthatbelongstosomeoneelse.Suchclaimsdonotrest,then,eveninpart,onintereststhatarenotrootedinexclusiverights.

Thedistinctionbetweenmisfeasanceandnonfeasancehaslongbeentakenbythelawasafundamentalandfixedpointintheunderstandingofliability,bothwellbeforeandthroughoutthedevelopmentofnegligencedoctrineinthiscentury.44This,Isuggest,explainshowtheexclusionaryrulecouldhavebeenformulatedpriortothisperiodandwhyitwasmaintainedunchangedduringit.Moreover,withveryfewexceptions,courtshavenotarticulatedthisdistinctioningeneralandabstracttermsbutratherhaverecognizedit,withoutnamingorconceptualizingit,inthecontext,andthroughtheanalysis,ofparticulartypesofcircumstances.LordDiplocksdiscussionisagoodexampleofthis.45Thus,thefactthatthecourtshavenotexpresslystatedthataconcernovernonfeasanceisthebasisoftheexclusionaryruleisquiteconsistentwithusualpracticeanddoesnotinitselfcountagainsttheproposedexplanation.Still,onemightwonderwhetherthereareanyjudicialopinionsthatexplicitlyjustifytheexclusionaryruleoilthisground.Tomyknowledge,therehavebeenatleasttwothejudgmentofCardozoCJinH.R.MochCo.v.RensselaerWaterCo.46and,morerecently,theconcurringopinions(p.450) ofLushandMurphyJJoftheSupremeCourtofVictoriainSealev.Perry.47

IV.TheFitWithDetrimentalRelianceandwithIntentionalInterferenceWithContractToconcludetheessay,Iwillbrieflyexplainhowthisproposedjustificationfortheexclusionaryrulefitstogetherwiththeanalysisofliabilityincasesofjustifieddetrimentalrelianceandintentionalinterferencewithcontract,thelastofthenon-exclusionarysituationsofeconomiclossthatremaintobediscussed.

A.JustifiedDetrimentalRelianceItisnowfirmlyestablishedthatwherethereexistsaso-calledspecialrelationshipbetweentheparties,therecanberecoveryfornegligentlycausedfinancialloss.Thedecisionsthatfirstupheldandarticulatedthisbasisofliabilityresteditontheplaintiffsjustifieddetrimentalrelianceonthedefendant.48Tomakeasuccessfulclaim,aplaintiffmusthavechangedhispositiontohisdetrimentasaresultoftheexpressorimpliedinducementbythedefendant.Bywayofillustration,consideranexampleofreliancein(p.451) circumstancesofrelationaleconomicloss.Attheinvitationofthedefendant,theplaintiffdecidestousethedefendants(orathirdpartys)bridgeforhisbusinesspurposes.Inmakingthisdecision,theplaintiffforeseeablyabandonsordoesnot


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undertakeacourseofactionwhichwouldnothavesubjectedhimtotheeconomiclossthathewillsufferifhisuseofthebridgeisdisrupted.Duetothedefendantswantofreasonablecare,thebridgeisdamaged,impairingtheplaintiffsuseofitandcausinghimfinancialloss.Inprinciple,therecanberecovery.

Inwhatcircumstanceswillthelawdeemthattheplaintiffhasjustifiablyreliedonthedefendanttohisdetriment?First,thedefendantmustinvitetheplaintifftorely.Itisonlythroughhisvoluntaryconductthatthedefendantcanbringhimselfintoaspecialrelationshipwiththeplaintiffwherebyhebecomesresponsiblefortheconsequencesoftheplaintiffsdecisiontorely.Morespecifically,itmustbereasonablefortheplaintifftoviewthedefendantashaving,bywordordeed,invitedhimtorelyonthedefendantforthereceiptofsomeadvantagewhetheraservice,athing,orastateofaffairs.Inresponsetothisinvitationtorely,theplaintiff,wesuppose,decidestogiveupsomeprospectiveorpresentbenefitbyabandoningaprojectedcourseofactionorbyalteringhiscircumstancesinsomedefiniteway.Thisdecisiontoforegothebenefitmayhavebeenexpresslyencouragedbythedefendantoritmaysimplyhavebeentheforeseeableconsequenceofthedefendantsinvitationtorely.Bygivingupthebenefit,theplaintiffexposeshimselftoariskofloss,buthedoesthisbecauseheexpectstoobtaintheadvantageheldouttohimbythedefendant.Theplaintiffsdecisiontorelyonthedefendantisthusbothreasonableandrational.Inthesecircumstances,thelawwillholdthatthereexistsaspecialrelationshipbetweenthepartiesandthatthedefendantmustexercisereasonablecareeitherinprovidingtheadvantageinkeepingwiththerepresentationoratleastinenablingtheplaintifftotakeupagainhisabandonedcourseofactionorhispreviousstateofaffairswithoutloss.Inanactionfornegligence,thepriorsituationwhichtheplaintiffhasgivenupwillbetakenasthebaselineformeasuringrecoverableloss.(Bycontrast,ifthereisavalidcontractbetweentheparties,theadvantagewhichthedefendanthasheldouttoinducetheplaintiffschangeofpositioncanbetakenasthebaselineinanactionforbreachofcontract.)Tortlawtreatsthepriorpositionasaprotectedinterest,thevalueofwhichcannotbediminishedthroughthedefendantsnegligence.

Thequestionwhichnowpresentsitselfisasfollows:doestheconclusionofpossibleliabilityincircumstancesofjustifieddetrimentalreliancefitwiththeproposedjustificationfortheexclusionaryrule?Toansweritaffirmatively,wemustshowthatrecoveryinsuchcasesdoesnotrepresenttheimpositionofliabilityfornonfeasance.

Thattheremaybeafitbetweenthetwoisinitiallysuggestedbythe(p.452) followingpoint.Incasesofeconomicloss(relationalorotherwise),theexclusionaryruleisappliedsubjecttotheprovisothatthelossdidnotresultfromjustifieddetrimentalreliancebytheplaintiffonthedefendant.49Buttheexclusionaryrule,Ihaveargued,illustratestheideathatthereisnoliabilityfornonfeasance.Henceitisnoteworthythat,intheexcerptfromDorsetYachtcitedearlier,LordDiplockexpresslyconditionstheconclusionofnoliabilityinavarietyofcircumstancesofnonfeasanceontheabsenceofaspecialrelationshipbetweentheparties.50Theparallelisstriking,anditseemsonitsfacetosupporttheproposedjustification.Toseewhetherthisisindeedso,letusreturntothe


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caseofrelianceincircumstancesofrelationaleconomiclossandidentifythedifference,ifany,betweenitandthosecasesthatcomewithintheexclusionaryrule.

Tomakeouthisclaimforlossincircumstancesofreliance,theplaintiffneednotassertarighttothecontinueduseofthething(thebridge,inourexample)onwhichhedependsbutwhichheneitherownsnorpossesses.Rather,theessenceofhisactionisthatthedefendantcausedhimafinanciallossbeforehewasabletoregainthepositionwhichheforeseeablyandreasonablygaveupatthedefendantsinducement.Theonlyrightthattheplaintiffisassertingisarighttoreturntohispreviouspositionwithoutsufferingloss,giventhatthedefendanthasnotactedwithduecare.Thefactthattheplaintiffdependsontheuseofsomethingwhichheneitherownsnorpossessesmerelyestablishesthecircumstancesinwhichhecanbemadeworseoffrelativetohispre-relianceposition.Theplaintiffscomplaintisnotthathehaslostthebenefitofsuchusebutthathehasbeenputinaworsepositionincomparisontohispriorsituation:theplaintiffwantstobereturnedtohisinitialposition,thatis,tobefreefromtherelationofdependence.Thus,incontrasttothecasesofeconomiclossthatcomeundertheexclusionaryrule,theplaintiffheredoesnotassert,eveninpart,arightagainstthedefendanttothecontinueduseofsomethingthatbelongstoanother.Andwhiletheplaintiffsdependence,beingtheconsequenceofhisdecisiontorely,cannotbeviewedasaninevitableincidentofpurposiveactivity(asitisinthecasesofunavoidableeconomicloss),itshouldnonethelessbeimputedtothedefendantratherthantotheplaintiffasamatteroffairness.Itwouldbeunreasonabletoallowthedefendanttodisownconsequencesforeseeablyflowingfromhisvoluntaryinvitationtorelyandfromhisfailuretouseduecare.51Thisisincontrasttothe(p.453) exclusionarysituationswhere,Iargued,theplaintiffisreasonablyviewedashavingactedathisownriskinmakinghisinterestsdependentontheavailabilityofsomethingelsewhichheneitherownsnorpossesses.Insum,thereseemstobenocontradictionbetweenthepossibilityofliabilityincircumstancesofjustifieddetrimentalrelianceandtheexclusionaryrule.52Unlikeactionsbarredbytheexclusionaryrule,theplaintiffsclaimhereseemstofallsquarelywithintheboundsofmisfeasance.

Againstthisconclusionhowever,thefollowingimportantobjectioncanberaised.Inallcasesofactionablejustifiedreliance,theplaintiffaltersandindeedmusthavealteredhispositionasaresultofthedefendantsinducement:inrelianceonthedefendantsrepresentations,theplaintiffeithergivesupanactualpresentadvantageorforgoesthepursuitofapossiblefutureadvantage.Ineithersituation,then,theplaintiffdoesnotactuallyhaveorenjoythisadvantageatthemomentofthedefendantsnegligence.Itmaynotevenbewithinhisactualpowertodoso.Andhecertainlydoesnotlegallypossessorownit.Wesawthatthelawtreatstheadvantage,whethergivenuporsimplynotpursued,assettingthebaselinefordeterminingtheexistenceofrecoverablelossandviewsitineffectasaprotectedinterest,thevalueofwhichspecifiestheplaintiffsentitlementvis--visthedefendant.Thisseemstoentailtheimpositionofliabilityfornonfeasance.Yetthisisnotthecase.

Toseewhynot,itisimportant,first,torecallthemainideathatliabilityformisfeasanceis


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premisedontheexistenceofanexclusiverightintheplaintiffasagainstthedefendant.Propertyorpossessoryrights,beinginprincipleexclusiverightsagainsttheworld,arealsorightsagainstthedefendant.Bycontrast,acontractright,asIshallshortlydiscuss,isincontemplationoflawapersonalrightasbetweentwopartieswhichiscreatedbytheircombinedactsofofferandacceptance(assumingtheotherrequirementsforcontractformationaremet).Theideaofanexclusiverightisthusnotexhaustedbyrightsofpropertyorpossession.Inaddition,contractmakesexplicitthatanexclusiverightbetweentwopartiesmaybeestablishedinandthroughtheirinteractionfairlyinterpreted.AsIwillnowexplain,thisisalsotrueofinteractionsinvolvinginduceddetrimentalreliance.

Thedefendant,wesuppose,hasinvitedtheplaintifftorelyonhim,fore-seeablyinducingtheplaintifftogiveuportoforgopursuinganadvantageforthesakeofthebenefitheldout.Theplaintiff,wealsoassume,isabletoshowthathewouldinfacthavekeptorobtainedtheadvantagehadhenotreliedonthedefendantsrepresentations.Incontemplationoflaw,theadvantage,thoughinfactgivenupornotpursued,isviewedassomethingthatcouldandwouldhavebeentheplaintiffsatthemomentofthe(p.454)defendantswrongbutforhisdecisiontorely.Nowthatdecisionwasitselfjustareasonableresponsetothedefendantsinvitationtorely,withitsholdingoutofaprospectivebenefit.Seeingthatitwasthedefendantwhoinvitedtheplaintiffsreliance,itwouldbeunfairforhimtoimputetotheplaintiffsowndecisionthefactthattheplaintiffdidnothavetheadvantage(becausegivenupornotpursued)atthemomentofthewrong.Asafairimplicationofhisvoluntaryactofinvitingreliance,thedefendantshouldthereforebeestoppedfromdenyingthefollowingtwostateofaffairs:first,thattheplaintiffhadtheeffectivepresentpowertokeeportoobtaintheadvantageatthemomentofthedefendantswrong;andsecondly,thattheplaintiffrefrainedfromexercisingthispoweronlyoncon-ditionthatthedefendantactedwithduecare.Thesetwostatesofaffairs,throughnotactuallyexistent,neverthelesscountasfactsasbetweentheparties.Takentogetherincircumstancesofthedefendantsfailuretouseduecare,theyimplyonthepartofthedefendantavoluntaryandbindingacknowledgementthattheplaintiffhadanexclusiveactualpowertohaveandtoenjoythatis,arighttotheadvantageatthemomentofthedefendantswrongdespitetheplaintiffhavinggivenitupornotpursuedit.Thisacknowledgementofrightisimputedtothedefendantasfairlyimpliedbyhisvoluntaryconducttowardtheplaintiff.Hencetheconclusionthattheadvantageshouldandcancountasaprotectedinterestagainstthedefendantforthepurposesoftortlaw.

Inreachingthisconclusion,itmustbeemphasizedthatwedonotholdthattheplaintiffhasactuallyacquiredlegalownershiporpossessionoftheadvantageandsosomethingthatcancountasarightagainsttheworld.Nosuchacquisitionhasoccurred.Rather,giventhedefendantsinvitationtorely,thedefendantisestoppedfromdenyingthattheplaintiffhasanexclusivepowertohaveandtoenjoytheadvantageatthemomentthedefendantfailstoexerciseduecare.Thedeterminationandthejustificationoftheplaintiffsentitlementinreliancecasesarethusstrictlyinternaltoananalysisofthefairrequirementsgoverningthedefendantsconductwithrespecttotheplaintiff.Theadvantagecountsasaprotectedinterestbecauseandonlyinsofarasthisisa


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reasonableimplicationoftheestoppelanalysis.Itfiguresasakindofquasi-propertyjustasbetweenthesetwoparties,giventhespecificnatureoftheirinteraction.53Inthisway,therequirementformisfeasanceismet.

(p.455) B.IntentionalInterferencewithContractTheproposedjustificationfortheexclusionaryruleholds,Ihavesaid,thattheplaintiffwillfailunlesshisinterestisgroundedinanexclusiverightasagainstthedefendantAbsentaspecialrelationshiporacontractbetweentheplaintiffanddefendant,thelawrequiresthattheplaintiffhaveaproprietaryorpossessoryright.Amerecontractrightagainstapersonotherthanthedefendantisdeemedinsufficienttoestablishliabilityfornegligentlycausedeconomicloss.Theproposedjustificationfortheexclusionaryrulewillbeconsistentwiththislegalconclusionif,butonlyif,incontemplationoflawaplaintiffscontractrightagainstoneperson(athirdparty)doesnotinitselfgivetheplaintiffanexclusiverightagainstsomeotherperson(suchasthedefendant).Untilnow,Ihavesimplysupposedthistobethecase.Imustnowshowthatthisisindeedsoandindicatetheconceptionofcontractthatunderliesthisconclusion.Iwillalsosuggestwhythisanalysisisconsistentwiththefactthatcontractrightsagainstthirdpersonsaretreatedasprotectedinterestsinactionsforintentional,asopposedtonegligent,interferencewithcontract.

Themoderncommonlawviewscontractasentailing,inCorbinswords,aspecialrightinpersonam,arightinthepromiseeagainstthepromisor,withthecorrelativespecialdutyinthepromisortothepromiseeofrenderingtheperformancepromised.54Thisviewholds,first,thatthepromiseesexclusiverightistotheperformanceofapromise,nottothethingitselfthathasbeenpromised;andsecondly,thatitisonlyarightasagainsttheperson(s)whohavepromised,nottheworldatlarge.Theonlynecessaryand,asitwere,inherentjuridicaleffectofabindingcontractisthatthepromisorisnolongerfreetodeprivethepromiseeofthepromisedperformancewithouthisconsent.Accordingly,althoughacontractmaygivemearighttotheperformanceofyourpromise,say,todeliverahorsetome,itdoesnotconferonmearighttothehorseitself.IacquirethatrightonlywhenIamputinphysicalpossessionofthehorsethroughdelivery.Ithen,andonlythen,acquireapropertyrightinthehorseora(p.456) rightinrem,andthusarighttoexcludethepromisorandothersfromusingthehorsewithoutmyconsent.Inthisway,acontractualrightisfundamentallydifferentfromarightinremcreatedbyexecutedtransactionsorbyanyotherconveyanceofpropertypureandsimple.

Incasesofnegligentlycausedeconomiclossthatarebarredbytheexclusionaryrule,thedefendantdamagesorappropriatessomethinginwhichtheplaintiffmayhaveacontractualinterest,therebyaffectingthatinterestwithout,however,havinganyintentiontoinjuretheplaintiffscontractualright.Giventhepurelyunintentionalnatureofthedefendantsactatleastwithrespecttotheplaintiffsinterest,theonlyfactthatcanbeimputedtothedefendantinrelationtotheplaintiffishisimpingementontheexistence,condition,oravailabilityofthethingitself(includingtheconse-quencesthereof)andhisonlyresponsibilityisforviolationsoftheplaintiffsrightsthatresultfromthisfact.Butthisimpingementdoesnotinfringeanyoftheplaintiffsrightsagainstthedefendantbecause


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theplaintiff,havingbyhypothesismerelyacontractualrightagainstathirdperson,isentitledjusttothelattersperformance,nottothethingitself.Accordingly,thedefendantsunintentionalinterferencewiththeplaintiffscontractualinterestcannotconstituteawrongagainsthim.Atmost,itmayleadtoabreachofcontractbythethirdpersonortothefrustrationoftheircontractifperformanceisrenderedimpossible.Onthisanalysis,then,thecommonlawviewregardingtheinsufficiencyofcontractualinterests(andofcourseofotherintereststhatarelessthancontractrights,suchasmereliberties)isjustified.Butifthisisso,onwhatbasiscanthelawtreatsuchcontractualrightsasprotectedinterestswhichbothcourtsandscholarsoftencharacterizeasquasi-propertyincasesofintentionalinterferencewithcontract?

Acluemaybefoundinthefactthat,inthecontextofassignment,thelawviewsacontractualrightasaquasi-propertyright.55Thereasonforthisisclear.Astheobjectofanassignment,thecontractualrightitselfasdistinguishedfromthething,istreatedbyathirdpartyassomethingthatmaybeacquiredasavaluableasset,butonlywiththeconsentoftheoneinwhomitisvested.Viewedinthiscontext,acontractualrightfunctionsnodifferentlyfromanypropertyright.Thesolequalificationthatmustbemadehereisthatinitsroleasapropertyinterest,therightisexclusiveasagainsttheassigneeonly,nottheworldingeneral.Itisproprietaryasbetweentheminvirtueoftheassigneesintention,asmanifestedinhisinteractionwiththeassignor,totreatthecontractrightinthisway.Now,sinceacontractrightcanbedeemedtobeapropertyinterestwhenitistheobjectofavoluntarytransactionofassignment,itmustalsobethecasethatitcanfunctioninthiswayinaninvoluntarytransaction,whenadefendant(p.457) (astrangertothecontract)expresslyorimplicitlytreatstherightasavaluableassetwhichhecanuse,appropriate,orinjurewithouttheright-holdersconsent.Whethertherehasbeenawrongfultakingoforinjurytothecontractrightviewedasaquasi-propertyinterestwillcruciallydependonthedefendanthavingthenecessaryintention.Butthisiswhatthelawrequiresincasesofintentionalinterferencewithcontract.Theremustbemaliceorsomefairlyspecificintentionthatisdirectedatthecontractrightitselfandthatimplicitlyregardsitasavaluableasset.56Theplaintiffscontractrightagainsttheothercontractingpartycountsthereforeasanentitlementagainstthedefendantbecausethisisafairandreasonableimplicationofthedefendantsactandofthespecifickindofinteractionthathastakenplacebetweentheplaintiffanddefendant.This,Isuggested,isalsotrueofinteractioninvolvinginduceddetrimentalreliance.Onthisbasis,weaccount,then,forthedifferentsignificanceofcontractrightsinintentionalandunintentionaltort.Herealsothedifferentpartsofthelawrespectingeconomiclossfittogether.57

V.ConclusionMyprincipalaiminthischapterhasbeentosuggestadefiniteanswertothequestionoftortliabilityforeconomiclossasthisarisesinthemainpartsofthelaw.Throughaninternalanalysisoftheverycategoriesanddistinctionsthatarepresentinthecaselaw,Ihavetriedtoshowthattheexclusionaryrulerestsonasimpleandprincipledbasis,namelythatactionswhichcomeunderthisruleinvolveclaimssoundinginnonfeasance,forwhich,inaccordancewiththegeneralconceptionofnegligenceatcommonlaw,there


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cannotbeliability.Withthisanswerinhand,Ihavearguedthatthedifferentpartsofthelawrespectingeconomiclossfittogether.Atleastinthecaseofliabilityforeconomicloss,tortlawdisplaysafundamentalunity.

Thelegalprinciplethatthereisnoliabilityfornonfeasancearticulatesaseverelylimitedideaofresponsibilitytowardothers:individualsmustonlynotinjurewhatalreadybelongstoothers;protectedinterestsaredefinedintermsofwhatothershave(suum),notwhattheyneedorwant.Andsince(p.458) thedutiesowedtoothersinthelawofnegligencemustbeframedinsuchawaythattheycanbebroughtundermisfeasance,thisrestrictednotionofresponsibilityseemstospecifyanorganizingnormativeprinciplefortortlaw.

Theanalysisundertakeninthisessayis,Ibelieve,theoreticallysignificantintworespects.First,itgivesusreasontothinkthatthelawalreadycontainswithinitselftheideasandtheprincipleswithwhichtoconstructapublicjustificationofthebasisandthelimitsoftheexclusionaryrule.Wemightnothaveexpectedthisconclusioninadvance,givenseriousandincreasingdisagreementamongcontemporaryjuristsandscholarsastotheproperresolutionofthisquestion.Togetbeyondpresentdisagreementaboutthepar-ticularquestionofeconomicloss,thefirststepwouldseemtorequirethatwerootthejustificationinanideaorsetofideaswhichisbasictothegeneralconceptionofnegligenceandwhichwethereforetake,atleastprovisionally,asafixedpointinourunderstandingofthelaw.ThisiswhatIhavetriedtodo.

Secondly,if,asIhavesuggested,thelawofeconomiclosspresentsuswithapublicjuridicalpointofviewthatisframedintermsofthedistinctionbetweenmisfeasanceandnonfeasance,thisprovidesuswithasuitablestartingpointforfurthertheoreticalreflection.Allreflectionmustbeginwithanobjectgiventoit.Theoreticalreflectionaboutlawpresupposesanobjectthatembodiesalegalpointofview.Thefirsttaskoftheory,then,istouncoverandtoidentifyclearlysuchanobject.Atheorythatfailstobegininthiswaycondemnsitselftobeingirrelevantasatheoryoflaw.Whateverelseitsobjectofcognitionmaybe,itwillnotbetortlaw.Thisisthebasicdifficultywiththeprevailingeconomicapproachestotheexclusionaryrule,brieflydiscussedintheIntroduction.Theiranalysesandconclusions,howeverfullyandrigorouslyworkedout,arenotexplanationsoftortlaw,andtheirprescriptionscannotbeonesthattortlawisobligedtorecognize.Ifpresentdisagreementaboutthebasisandthelimitsoftheexclusionaryrulechallengesthepossibilityofapublicbasisofjustification,prevailingtheoreticalapproachesthreatentodeprivelegaltheoryofanobjectforcognition.Thefundamentalandpervasivedistinctionwhichtortlawdrawsbetweenmisfeasanceandnonfeasancesuppliesuswithone.Thefurthertaskoftheorywouldbethecriticalyetimmanentexaminationoftheobjectspresuppositionsanditsentailments.Butthisisbeyondthescopeofthepresentessay.58

Notes:(1)Gasescommonlytreatedascomingunderthisfirstcategoryincludethefollowingtypesofcircumstances:Cattlev.StocktonWaterworksCo.[187480]AllE.R.220(Q.B.)


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(plaintiffcontractormustincuradditionalexpensestocompleteperformanceofhiscontractualobligationsonlandownedbyothercontractingpartybecauseofdamagecausedtoitbydefendantsnegligence);LaSocitAnonymedeRemorquageHlicev.Bennetts[1911]1K.B.243(plaintifftugownerlosesremunerationundertowagecontractwhenunabletocompletetowageofshipwhenlatterissunkenroutethroughdefendantsnegligence);Byrdv.English,43S.E.419(Ga.1903)(plaintiffsustainsfinanciallosswhenunabletooperatehisplantasaconsequenceofdefendantsnegligentinterferencewithsupplyofelectricityprovidedbythirdpersonundercontractwithplaintiff);CandlewoodNavigationCorp.v.MitsuiO.S.K.LinesLtd.[1986]A.C.1(appealtakenfromN.S.W.)(plaintifftime-chartererclaimsforwastedhirepaidundercontracttoownerofvesselandforprofitslostwhilevesselhadtobedockedforrepairscausedbydefendantsnegligence);Leigh&SillavanLtd.v.AliakmonShippingCo.[1986]A.C.785(plaintiffbuyersustainsfinanciallossasresultofdefendantdamaginggoodsatatimewhenrisk,butnotthepropertyinthegoods,haspassedtoplaintiff).

(2)See,e.g.,Murphyv.BrentwoodDist.Council[1990]2AllE.R.908(H.L.);EastRiverS.S.Corp.v.TransamericaDelavalInc.,476U.S.858(1986);cf.SutherlandShireCouncilv.Heyman(1985)60A.L.R.1(Austl.).TheSupremeCourtofCanada,however,hasrecentlycometoacontraryconclusion.SeeWinnipegCondominiumCorp.No.36v.BirdConstr.Co.,121D.L.R.4th193(Can.1995)

(3)Examplesare:Newlinv.NewEnglandTel.&Tel.Co.,54N.E.2d929(Mass.1944);SpartanSteel&AlloysLtd.v.Martin&Co.[1972]3AllE.R.557(Eng.C.A.);andMuirheadv.Indus.TankLtd.[1986]1Q.B.507(Eng.C.A.).IhaveinmindhereRESTATEMENT(SECOND)OFTORTS(1977),766Ccmt.b,ilhis.5.

(4)Forexample,Glanzerv.Shepard,135N.E.275(N.Y.1922);HedleyByrne&Co.v.Heller&PartnersLtd.[1964]A.C.465.Thisbasisofliabilityisrecognizedregularlyindecisionswheretheexclusionaryruleisstrictlyapplied.SeeforinstanceMurphy[1990]2AllE.R.at920,perLordKeith,at92930,perLordBridge,andat934,perLordOliver.Idiscussjus-tifieddetrimentalrelianceatinfra,textaccompanyingnotes4853.

(5)EversinceLumleyv.Gye,2E.&B.216(1853).

(6)See,forinstance,discussionsandcasescitedinW.PAGEKEBTON,DANB.DOBBS,ROBERTE.KEETON,&DAVIDG.OWEN,PROSSERANDKEETONONTHELAWOFTORTS(5thedn.,1984),981.Idiscussintentionalinterferencewithcontractatinfra,textaccompanyingnotes547.

(7)FlemingJames,Jr.,LimitationsonLiabilityforEconomicLossCausedbyNegligence:APragmaticAppraisal,25VAND.L.REV.43(1972).RecentEnglishandCommonwealthjudicialexamplesofthisviewinclude:ElectrochromeLtd.v.WelshPlasticsLtd.[1968]2AllE.R.205,208(GlamorganAssizes)(GeoffreyLaneJ);Leigh&SillavanLtd.v.AliakmonShippingCo.[1986]A.C.785,81617;CandlewoodNavigationCorp.v.MitsuiO.S.K.LinesLtd.[1986]A.C.1,25;andNorskPac.S.S.Co.v.CanadianNatlR.R.[1992]1S.C.R.1021,1054ff.(Can.)(LaForestJ).


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(8)Annsv.MertonLondonBoroughCouncil[1977]2AllE.R.492(H.L.)wasoverruledinMurphyv.BrentwoodDist.Council[1990]2AllE.R.908(H.L.).ForadifferentinterpretationofAnns,seetheinterestingremarksofLordOliverinAliakmon[1985]2AllE.R.at568.

(9)Foranexceptiontothesepolicy-basedapproaches,seeStephenPerry,ProtectedInterestsandUndertakingsintheLawofNegligence,42U.TORONTOL.J.247(1992).LimitsofspaceprecludediscussionofPerrysview,whichisdifferentfromtheexplanationproposedhere,butIhopetodosoinaplannedexpandedversionofthepresentchapter.

(10)E.g.,W.Bishop,EconomicLossinTort,2OXFORDJ.LEGALSTUD.1(1982).Bishopdismissesthelegalrequirementofaproprietaryorpossessoryrightaseconomicallyarbitrary:[t]hefactthattheplaintiffdoesnotownpropertythathassufferedphysicaldamageiseconomicallyirrelevant,asisthefactthathislossarisesbywayofcontract:id.at25.SeealsoP.P.Craig,NegligentMisstatements,NegligentActsandEconomicLoss,92L.Q.R.212,234(1976);RICHARDA.POSNER,TORTLAW:CASESANDECONOMICANALYSIS(1982),4646.

(11)E.g.,MarioJ.Rizzo,ATheoryofEconomicLossintheLawofTorts,11J.LEGALSTUD.281(1982).Rizzoascribesdecisiveeconomicimportancetowhetherachannellingcontractexistedorcouldhaveexistedbetweentheplaintiff(whosufferedrelationaleconomicloss)andathirdperson(whosufferedinjurytopersonorproperty)underwhichthelattercouldhavebeenobligedtoindemnifytheformerforhiseconomicloss.MydifficultywiththiscontentionisthatRizzodoesnot,inmyview,showthatanyleadingdecisionmakesthis,whetherexplic-itlyorbynecessaryimplication,thereasonedbasisofitsconclusion.Forasimilarcriticism,seeRobertL.Rabin,TortRecoveryforNegligentlyInflictedEconomicLoss:AReassessment,37STAN.L.REV.1513,1535(1985).

(12)ThisreferencetocertainfeaturesofapublicjustificationdrawsonthemuchmoredevelopedaccountpresentedbyRawls.SeeJohnRawls,JusticeasFairness:ABrieferRestatement(1990)(unpublishedmanuscript,onfilewithauthor);JOHNRAWLS,POLITICALLIBERALISM(1993).

(13)IaddressthesequestionsinPeterBenson,TheBasisofCorrectiveJusticeanditsRelationtoDistributiveJustice,77IOWAL.REV.515(1992).

(14)James,supra,note7,at47.

(15)RobinsDryDock&RepairCo.v.Flint,275U.S.303(1927).

(16)Simpson&Co.v.Thomson[1877]3A.C.279,28990(appealtakenfromScot.).

(17)Weller&Co.v.Foot&MouthDiseaseResearchInst.[1965]3AllE.R,560,563(Q.B.).

(18)Id.


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(19)OneearlyAmericancasethatdoessoisConnecticutMut.LifeIns.Co.v.NewYork&NewHavenR.R.,25Conn.265,275(1856).ItmightbethoughtthatthelandmarkcaseofCattlev.StocktonWaterworksCo.[187480]AllE.R.220(Q.B.),orthewidely-citeddecisionofCardozoCJinUltramaresCorp.v.Touche,174N.E.441(N.Y.1931),arefurtherexamples.Thisview,Ibelieve,ismistaken.Here,afewbriefremarkswi

The Basis for Excluding Liability for Economic Loss in Tort Law

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